Looking back at the recent record-breaking settlement of a securities class action by Australia’s Aristocrat Leisure, Stuart Wilson, the chief executive of the Australian Shareholders’ Association, believes that the case is a huge win for shareholders. In an article in today’s The Australian, Wilson observes that prominent litigation funder IMF also hit the jackpot in this case to the tune of $37 million of the $144 million settlement (with the law firm Maurice Blackburn getting about $8.5 million of IMF’s take). Wilson believes that having now seen the enormous profit potential if class actions are done right, law firms will soon begin to move into IMF’s territory and drive the price of litigation funding down.
Still, he says,there are at least two reasons why Australia will not soon follow the US’s lead “in relation to frivolous shareholder actions. The first is that in Australia, costs can be awarded against the plaintiff, and are paid by the funder. In addition, IMF is highly conservative in its assessment of what prospective cases will cost, whether shareholders will win, and the amount of any settlement or judgment. With the risk of having to pay costs, only the strongest cases are considered.”